Written Commentary
CRUDE OIL
The seesaw battle between slowly declining supply and fears of swift demand losses has extended into the new week with two-sided action yesterday and a sharp range down and recovery already posted in early action today. Even though news of a 2/3rds decline in production at the Russian state-owned oil company is less important given the concerted effort to isolate Russian supply, that development provides support to the global energy markets.
While gasoline contracts this morning spiked down to a 3-day low they have clearly rejected that move. Certainly, the gasoline market is the most elastic energy product to high prices, but early reports for the coming kickoff of the northern hemisphere driving season indicate consumers have not been significantly deterred. With reports overnight that the European gasoline market “has never looked tighter” combined with previous reports of significant European gasoline cargoes headed to the US, it seems that supply is tight on both sides of the Atlantic. Even more surprising is the fact that gasoline prices have not caved in following reports that US gasoline imports this month are the highest this year.
NATURAL GAS
After some wild two-sided volatility yesterday morning, natural gas prices regained upside momentum, forged an 11-day high and posted the second highest high of the July contract this morning. It should be noted that gains this morning in the US have been forged in the face of weaker European natural gas prices off talk of rising LNG imports which were found to be up 70% in the first four months of 2022. In a longer-term development the trade saw predictions at the 2022 World Gas Conference (in South Korea) predicting significant tightness in LNG supply into the coming winter.
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